Investing.com -- The Dow slumped Monday, pressured by a spike in Treasury yields as geopolitical tensions and stronger-than-expected retail sales data dented expectations for interest rate cuts and overshadowed strong earnings from banking giant Goldman Sachs.
At 16:00 ET (20:00 GMT), Dow Jones Industrial Average fell 248 points, or 0.7%, S&P 500 fell 1.2%, and NASDAQ Composite fell 1.8%.
Spike in Treasury yields on strong retail sales curbs risk sentiment
Treasury yields continued to add to recent gains after retail sales grew faster than expected last month, indicating strength in the consumer, which drives the bulk of U.S. economic growth, and cooling expectations for Federal Reserve rate cuts this year.
The yield on the United States 10-Year Treasury jumped 11 basis points to 4.61%.
The Commerce Department said Monday that retail sales rose 0.7% last month, topping economists’ forecast for a 0.4% rise. The retail sales control group – which has a larger impact on U.S. GDP – rose 1.1% above expectations for a 0.4% rise.
Following the data, some economists revised expectations upward for Q1 economic growth and warn that rates cuts weren't coming anytime soon.
"A third straight quarter of GDP growth over 3% should be the nail in the coffin for anyone expecting rate cuts any time soon," Jefferies said in a note.
Goldman Sachs, Charles Schwab help blunt losses in financials
Investment bank Goldman Sachs (NYSE:GS) was one of the few bright spots on the day, closed nearly 3% higher after reporting a jump in Q1 profit, fueled by a recovery in underwriting, deals and bond trading in the first quarter that lifted its earnings per share to the highest since late 2021.
Charles Schwab (NYSE:SCHW) stock rose 2%, after brokerage reported first-quarter earnings that topped Wall Street estimates, driven by a surge in asset management fees in Q1.
Apple loses place as No. 1 phone maker; Tesla cuts jobs; Reddit in focus
Elsewhere, Apple (NASDAQ:AAPL) stock fell 2% after data from research firm IDC indicated that the iPhone maker has lost its crown as the world’s No.1 phone maker, with Samsung regaining that spot in the wake of Apple’s weak first quarter.
Apple's smartphone shipments dropped about 10% in the first quarter of 2024, a period when global smartphone shipments increased 7.8% to 289.4 million units.
Tesla (NASDAQ:TSLA) stock fell more than 5% following reports that the EV manufacturer may be about to announce large scale redundancies as it grapples with worsening sales.
Reddit Inc (NYSE:RDDT) fell more than 5% after several Wall Street firms initiated coverage on the stock, with Morgan Stanley (NYSE:MS) saying the stock was valued as it, together with peers JPMorgan (NYSE:JPM) and Goldman Sachs, slapped a neutral rating on the stock the social media platform at equal weight, saying shares are already trading at fair value.
But Deutsche Bank (ETR:DBKGn) initiated coverage at buy with a $50 price target, saying Reddit has "significant opportunity to grow high-margin data licensing revenue, particularly with the Bulk Data product aimed at the large LLM players"
Geopolitical tensions weigh amid Iran-Israel conflict
Geopolitical tensions also gripped markets as Israel is reportedly weighing up an imminent response to an attack from Iran over the weekend, NBC reported Monday, citing an unnamed Israeli official.
The potential for the tit for tat skirmishes to break out into a wider war in the Middle East has stoked fresh geopolitical tensions, forcing investors into safe-havens including gold.
(Peter Nurse, Ambar Warrick contributed to this article.)